House Prices Rise but Lack of Competition keeps Mortgage Rates High

Nationwide’s House Price Index reported that house prices rose by 1.6% in August the fourth consecutive month that the lender has reported an increase.

Money market rates have fallen again and the 2 year swap rate has dipped to 1.96%. The last time that 2 year swap rates were below 2%, several lenders were offering fixed rates at less than 3%.

However the current best 2 year fixed rates are currently around 3.5% with many nearer the 4% mark. It is a similar story when looking at 3 month LIBOR (now down to 0.69%) and the general lack of movement in tracker margins.

However, to meet this increase in margin with claims of profiteering is to miss the bigger problem of the continued lack of competition. Lenders do not have the appetite to lend and this lack of supply in the face of continued demand means that mortgage rates will remain at higher margins until more lenders actively participate in the market.

Whilst recent figures such as Nationwide’s have given glimpses of better news in the housing and mortgage market it cannot be ignored that lending remains tight, particularly for anyone that cannot raise a 25% deposit.

As the housing market improves, a continued dearth of available finance will act as a serious constraint on recovery, not only in the housing and mortgage markets but also the wider economy.

Think carefully before securing other debts against your home. Your home or property may be repossessed if you do not keep up repayments on your mortgage.

We're here to offer our customers excellent fee free mortgage advice. Our expert advisers will help you secure the best mortgage deal whether you're a first time buyer, remortgaging your home, buying to let or moving up the property ladder. We'll help you throughout the mortgage process – no hidden costs or surprises, just straightforward, honest, mortgage advice.

Representative example A mortgage of £190,596 payable over 22 years, initially on a fixed rate until 30/04/23 at 1.65% and then on a variable rate of 4.90% for the remaining 17 years would require 63 payments of £860.92 and 201 payments of £1102.66. The total amount payable would be £277,868 made up of the loan amount plus interest (£85,277) and fees (£1,995). The overall cost for comparison is 3.6% APRC representative.

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